The sum of money UK financial advisers will have to pay to the Financial Services Compensation Scheme (FSCS) has fallen by £22m ($28.7m, €25.6m) from the initial budget set out in January 2019.
IFAs will contribute £153m to the FSCS for the 2019/20 financial year, instead of the £175m initially planned.
Overall, this is an increase of £23m for the life distribution, pensions and investment intermediary sector, from the 2018/2019 financial year.
All financial services firms subject to the FSCS will collectively pay £532m for the year.
Of this, £211m will come from the advisory sector – with £58m contributed by product providers.
Reasons for dip
Falling pension claims remain the driving force behind the reduction in compensation costs hitting the advice sector, the FSCS said.
Outgoing FSCS chief executive Mark Neale said: “The bulk of these claims will continue to arise from bad advice to transfer retirement savings out of occupational schemes and into Sipps (self-invested private pensions) – usually with a view to investment in risky and illiquid assets.
“But we have seen some falling off in the rate of growth of these claims, which we now expect to number 8,200 in 2019/20 (7,800 last year) compared to our January forecast of 10,600.
“By contrast, we now expect more claims against the providers of Sipp platforms themselves next year.
“The result is a fall of £22m in the levy on life, pensions and investment advisers, but a rise of £38m in the levy on investment providers which include Sipp platform providers.
“The latter rise also reflects our expectation that we shall receive roughly 1,000 discretionary management claims arising from the failure of Beaufort Securities.”
The FSCS’s compensation limit for the life distribution, pensions and investment intermediary sector has been raised to £85,000 per person per firm, up from £50,000.
Lastly, as reported by International Adviser, chief executive Neale is set to be replaced on 4 May by Caroline Rainbird, who will be in the hot seat for three years.